Jeff Bezos says Amazon is gunning for an Oscar — here's why

Amazon CEO Jeff Bezos said he wants his company to win
an Academy Award for its original films.Lamar Salter

Amazon intends to produce 16 feature films a year with the
objective "to win an Oscar," says CEO Jeff Bezos. It's
all for the company's most important initiative, Amazon Prime.

Getting people to pay for Amazon Prime is often as simple as
getting them to sign up for a free trial. Once new Prime members
use the product, the hope is that they'll love it and subscribe
for years.

Prime members spend an average of
$1,500 per year compared to the average customer's $625. It
makes sense to use Amazon as your first shopping stop when you
have free shipping, a great user interface, and
a responsive customer support staff.

Free two-day shipping

Free two-day shipping is the oldest and most important Prime
perk. It incites millions of people to sign up for the premium
service around the holidays. There were more than 3 million new
subscribers during the third week of December alone.

It may be true that many of these subscriptions will be cancelled
during the trial period. But if even a small percentage of them
stay on, it's a coup for Amazon since Prime members spend 140%
more, on average, than their non-Prime counterparts.

Original television productions

New members can also be acquired with award-winning content. If
you want to see Transparent — Amazon's
five-time Emmy-winning show — you need to have a Prime
account. You could sign up for the free trial and binge watch a
few seasons before cancelling. But if the show is compelling,
it's reasonable to assume that you'd keep your Prime membership
in order to watch Season 3 when it's released next
year.

This is why Amazon goes to great pains to produce award-winning
content. It earned five Golden Globe nominations in 2015,
putting it behind only Starz (6), HBO (7), and Netflix(8).
Amazon's original content offerings continue to grow in number
and gain popularity.

It doesn't release ratings data for its shows, but has said that
one of its latest offerings, The Man in the High
Castle, took only a month to become the service's
most-streamed show. In short, it's getting harder to ignore
Amazon if you love good television.

Only users with an Amazon
Prime account can watch Amazon's award-winning show
Transparent.Amazon/"Transparent"

Next stop...films

Academy Award quality, mass appeal, and niche movies are the next
step in this subscriber acquisition strategy. If even four of
Amazon's 16 films produced a year appeal to you, how can
you not be a Prime member? The cost of seeing these
in the theater with a loved one would cover your Prime membership
($99) for the year. All of the other Prime benefits are
available for "free."

An action film released in February will draw in a swath of
temporary Prime users, many of whom will stay. A romantic comedy
in June will do the same for a different set of customers, and on
and on. After a customer joins they will likely purchase
more on the site. They might, for a fee, store their music,
pictures, and videos on Amazon's servers for safe keeping and
ease of access from multiple devices. The point being, once
people become Prime members, Amazon can generate revenue
from them in multiple ways.

Amazon's complicated but its core strategy
isn't

Amazon has a lot of moving parts but every decision it makes for
its retail business is as an attempt acquire and retain
Prime members. First the company offered free two-day shipping as
the carrot to pay a yearly flat fee. Since then the price has
been raised but so have the Prime offerings. Customers now
receive streaming video and music, cloud storage, and Kindle
e-book rentals. The price will rise over time but so to will the
perks that come from membership.

Investments now to improve Prime and increase the number of
members will pay off over the long term. Original film production
is another step in this process. It's estimated that half of U.S.
households will use Prime by 2020. Amazon is a tremendous
business — the longest of long-term plays — and one
that I would happily hold for the next 10 years without even
checking the stock ticker.